Correlation Between Floor Decor and Haverty Furniture

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Can any of the company-specific risk be diversified away by investing in both Floor Decor and Haverty Furniture at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Floor Decor and Haverty Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floor Decor Holdings and Haverty Furniture Companies, you can compare the effects of market volatilities on Floor Decor and Haverty Furniture and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Floor Decor with a short position of Haverty Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and Haverty Furniture.

Diversification Opportunities for Floor Decor and Haverty Furniture

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Floor and Haverty is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Haverty Furniture Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haverty Furniture and Floor Decor is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Floor Decor Holdings are associated (or correlated) with Haverty Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haverty Furniture has no effect on the direction of Floor Decor i.e., Floor Decor and Haverty Furniture go up and down completely randomly.

Pair Corralation between Floor Decor and Haverty Furniture

Considering the 90-day investment horizon Floor Decor Holdings is expected to generate 1.15 times more return on investment than Haverty Furniture. However, Floor Decor is 1.15 times more volatile than Haverty Furniture Companies. It trades about 0.06 of its potential returns per unit of risk. Haverty Furniture Companies is currently generating about 0.03 per unit of risk. If you would invest  7,015  in Floor Decor Holdings on July 1, 2024 and sell it today you would earn a total of  5,262  from holding Floor Decor Holdings or generate 75.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Floor Decor Holdings  vs.  Haverty Furniture Companies

 Performance 
       Timeline  
Floor Decor Holdings 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Floor Decor Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Floor Decor exhibited solid returns over the last few months and may actually be approaching a breakup point.
Haverty Furniture 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Haverty Furniture Companies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Haverty Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

Floor Decor and Haverty Furniture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Floor Decor and Haverty Furniture

The main advantage of trading using opposite Floor Decor and Haverty Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floor Decor position performs unexpectedly, Haverty Furniture can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Haverty Furniture will offset losses from the drop in Haverty Furniture's long position.
The idea behind Floor Decor Holdings and Haverty Furniture Companies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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